Divided EU in new talks on Russia sanctions over Ukraine

The European Union holds a new round of talks on Thursday to try to agree on the latest round of sanctions against Moscow as a fragile truce in Ukraine appeared to be largely holding.

EU leaders agreed last week to slap more punitive measures targeting Russia's stagnant economy but Friday's ceasefire forced a rethink on the timing of the sanctions.

German Chancellor Angela Merkel called Wednesday for the new restrictions to be introduced quickly as they could always be lifted if the ceasefire keeps a lid on the five months of fighting in eastern Ukraine.

But EU envoys decided to suspend their debate until Thursday after some members -- wary of further economic reprisals by Russia -- said they wanted to wait and see what happened on the ground in Ukraine.

In a surprise announcement on Wednesday, Ukrainian President Petro Poroshenko said Russia had withdrawn the bulk of its forces from his country and pledged greater autonomy for the separatist east in moves that could help sustain the peace pact.

The United States described Poroshenko's comments on the Russian troops as "a good, tiny first step" but said it was unable to verify what would be a potentially significant development in the five-month crisis.

The West is stepping up sanctions against major Russian businesses and allies of President Vladimir Putin as punishment for what it views as Moscow's military aggression in the ex-Soviet state.

NATO said last month that Russia had funnelled in at least 1,000 elite troops and heavy weapons and massed 20,000 men on the border to support a rebel counter-surge that has dramatically reversed the fortunes of the Ukrainian army.

Poroshenko said Friday's ceasefire -- the first backed by both Kiev and Moscow since the pro-Russian insurgency erupted in April -- had dramatically improved security in the country's war-ravaged industrial rustbelt.

He said that according to Ukrainian intelligence, 70 percent of Russia's forces have been removed.

"This gives us hope that there are good prospects for the peace initiative."

Moscow denies having even deployed troops or weaponry across the border, and Putin dismissed the NATO claims as a reckless attempt to "revive" the Cold War-era Western military bloc.

- 'Territorial integrity' -

Poroshenko -- elected in May on a promise to crush the rebellion and preserve Ukraine's unity -- also waded into explosive political territory by promising to submit a bill to parliament granting parts of the east temporary self-rule.

But he stressed this did not mean that the rebel-held territories were slipping from Kiev's control.

"Ukraine will not make any concessions on issues of its territorial integrity," he said.

The Kremlin has long sought to turn Ukraine into a loose federation in which the largely Russian-speaking regions of Donetsk and Lugansk regions establish their own trade and diplomatic relations with Moscow.

But the number two in the separatist leadership of Donetsk said the rebels still planned to seek outright independence from Kiev.

"We are not considering remaining part of Ukraine," Andrei Purgin told AFP.

Friday's truce was signed in the Belarussian capital Minsk after months of warfare that has killed more than 2,700 people and forced at least half a million from their homes.

Both sides have since reported sporadic violations and AFP correspondents heard artillery fire overnight near the airport in the main insurgent stronghold of Donetsk.

Kiev said the lives of eight Ukrainian servicemen and one civilian had been lost since Friday.

The truce was announced just as the tide had shifted strongly in the insurgents' favour on the eastern battlefields, prompting suggestions that Kiev had negotiated the deal from a position of weakness.

Sanctions were ratcheted up by Brussels and Washington after the July downing of a Malaysian jet over rebel-held territory that claimed 298 lives and raised concerns about Russia's alleged military support for the revolt.

A preliminary report by Dutch investigators Tuesday did not point the figure of blame over the crash but appeared to back claims the plane was hit by a missile.

Kiev and Washington believe it was blown out of the sky by a Russian-supplied ground-to-air system, but Moscow said Kiev bore "full responsibility" for the disaster.

Putin has accused NATO of making up the charges over its involvement in Ukraine to justify its decision to deploy a new force in eastern Europe and encroach on Russia's western frontier.

"The crisis in Ukraine, which was basically provoked and created by some of our Western partners, is now being used to revive this military bloc (NATO)," Putin said.